When Roark Capital-backed Youth Enrichment Brands acquired School of Rock last fall, it signaled a new direction for CEO Justin Hoeveler and his platform company.
For the first time, YEB added a non-sports concept to its youth activities portfolio, although the brand remained true to its name and its core mission by adding the popular youth music lesson brand.
“For us it’s all about teaching youth life skills. School of Rock certainly aligns with our mission to help every kid discover and develop their passion,” Hoeveler said.
Hoeveler was one of four panelists on the Dealmakers Week webinar “The Hot New Franchise Dealmaking Categories Beyond Restaurants” led by Franchise Times Editor in Chief Laura Michaels. The other panelists were Charlie Hurt, managing director of Fifth Third Securities; Ryan Brunker, managing director of Baird’s Global Consumer Investment Banking Group and Comfort Keepers CEO Natalie Black.
YEB’s School of Rock acquisition earned the company a Franchise Times Dealmakers award, as did Halifax Group’s acquisition of Comfort Keepers and Sodexo Worldwide Home Care. Hurt acted as the sell-side adviser for Flynn Group’s acquisition of Planet Fitness franchisee Alder Partners, another Dealmakers award winner.
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Panelists shared insights from their involvement in some of the biggest M&A deals of 2023 and offered predictions for 2024 in the M&A franchising space.
In a deal School of Rock President Rob Price described at the time as a “blockbuster for us,” the music education franchise and its 350 locations joined Youth Enrichment Brands as the platform’s fourth brand in October.
Youth Enrichment Brands formed in late 2021 following the acquisition of i9 Sports. The youth sports league franchisor joined US Sports Camps, which Roark bought in 2020. YEB added Streamline Brands—franchisor of swim school concepts SafeSplash, SwimLabs, Swimtastic, Saf-T-Swim and Miller Swim School—in 2022.
“Last year was a very cautious market from an M&A perspective,” Brunker said. “However, I think high-quality assets that continue to perform in the sub sectors are going to command high investor interest regardless of the macro environment.”
Brunker assisted School of Rock in closing the deal with YEB.
The Dealmakers panelists were united in seeing a renewed resurgence in brands focusing on growth with multi-unit and multi-brand operators and noted the increase in private equity money flowing into the non-restaurant space.
“We really wanted to find a buyer that was focused on home care, who loves the field of home care, loves franchising and has the patience and the understanding of the international” market, said Black about Halifax’s acquisition of Comfort Keepers.
With more than 700 locations worldwide and operations in six European countries, Black confirmed senior care provider Comfort Keepers is actively looking at international expansion. With Halifax principals accompanying them, she said the company visited its European operations last year prior to the deal.
“They wanted to understand each piece moving forward, and making sure our brand was the right fit,” she said.
Hurt said he anticipates more M&A deals crossing the finish line in 2024 as lending rates stabilize, inflation moderates and jobs reports remain strong.
“We saw a downward trend in M&A activity in 2022 and 2023, and we have never had three consecutive years on a downward trend. For now, at least, the financing environment” is a little better, he said.
Brunker joined Hurt in expressing optimism that M&A activity in non-restaurant brands and platforms will continue to increase in 2024.
“We continued to see this phenomenon of broadening interest in the franchising space from the private equity community,” he said. “Not only did we see the typical parties that you know have been extremely successful and active in the space over the past decade or so, but also an emergence of new investors prioritizing franchising as key investment theme just given the power of that business model.”